UPDATE 1-Chile's LAN says TAM takeover ruling flawed

Tue Sep 27, 2011 7:27pm EDT

 * LAN calls on regulator to rectify calculation errors
 * Airline sees merger completed by first quarter
 * Deal still pending approval by Brazil anti-trust council
 (Updates with regulator comments, details throughout)
 By Antonio de la Jara and Simon Gardner
 SANTIAGO, Sept 27 (Reuters) - LAN Airlines LAN.SN (LFL.N)
said on Tuesday a Chilean anti-trust ruling that imposes a host
of conditions on its planned multibillion-dollar takeover of
Brazil's TAM TAMM4.SA was flawed, and continues to study it.
 LAN said it had asked anti-trust regulator TDLC, which last
week conditionally approved a deal to pave the way for the
creation of one of the world's biggest airlines, to rectify
"numerical errors" in calculations of its national and
international tariffs, or yields. [ID:nS1E78L0UU]
 It said it would continue to study the ruling this week,
and some analysts believe that LAN could decide to appeal
sections of the ruling to the Supreme Court.
 "The company will continue to analyze the measures, their
impact and effect during this week," LAN said, reiterating it
was confident the deal would be complete by the first quarter.
 "The company has presented a request to the TDLC today
which rectifies numeric calculations in the ruling ...
regarding yields (fares per kilometer on each route)," it
 Shares in LAN closed 0.77 percent firmer on Tuesday,
sharply underperforming the IPSA blue chip share index .IPSA.
The share has been broadly stable since the regulator's
announcement, and analysts say the decision had been largely
priced in.
  Graphic on LAN and TAM:      link.reuters.com/jup83s
  FACTBOX-Chile OKs LAN takeover of TAM       [ID:nS1E78J0E1]
  FACTBOX-Measures LAN must take              [ID:nS1E78K1CR]
  FACTBOX-Biggest airlines by market cap      [ID:nS1E78K20B]
 LAN's chief operating officer, Ignacio Cueto, told a
conference in Santiago last week that Chile's antitrust
tribunal's approval was a step forward, but said administrative
issues arising from the ruling will take four to five months to
iron out.
 The takeover will create an airline giant with joint
revenue of $10.4 billion, based on 2010 figures. When the
planned merger was announced last August, the all-stock
transaction was worth an estimated $2.7 billion.
 TDLC says the merged airline must comply with a host of
conditions, including ceding slots on the key Santiago to Sao
Paulo route and renouncing participation in one of two global
 The measures also require LAN to modify its self-regulation
and cancel and revise code-sharing agreements with airlines
that do not belong to the same alliance as the newly merged
LATAM on some routes.
 LAN has been asked to cede four of its frequencies from
Santiago to Lima to other Chilean airlines, which would also
limit its flights from the Peruvian capital to other
 The most restrictive measures include so-called "interline"
agreements with other airlines interested in operating three
key routes, quitting one of the two global alliances LAN and
TAM are part of, and opening the domestic market to non-Chilean
carriers, analysts say.
 Industry experts say the ruling of the antitrust tribunal
will act as a blueprint for future mergers in Chile. However,
they say the deal could face delays in Chile if a third party,
such as a rival airline, appeals the decision to the Supreme
 In Brazil, the deal to create the new LATAM Airlines Group
has already cleared two of three anti-monopoly hurdles and is
now awaiting approval from antitrust council Cade.